I’ve always found the concept of ‘strategy’ to be too nebulous or theoretical for most entrepreneurs and small business owners; a word and concept that’s bandied about in MBA programs and large corporations without any clear agreement as to what it actually means.
Even the Harvard Business Review has an article asking the question, “What is strategy?”.
So if you don’t feel completely clear on what strategy is and what makes a good one, you aren’t alone!
But we can’t leave strategy to chance just because the concept is a little unclear to us. One of my favorite quotes is ‘hope is not a strategy’!
I’ve personally spent a lot of time evaluating various strategy tools and planning resources, and utilized a variety of them in my businesses over the years. Some of them have been incredibly impactful…others not so much.
One of my favorite strategy resources is Blue Ocean Strategy.
If you don’t have a copy of that, I highly recommend that you get it. I think it’s one of the most practical resources on strategy that I’ve discovered in my career. When I say practical, I mean that it’s got a good, useful set of tools and frameworks you can use to develop a strategy, even if you’re not a massive corporation with a ton of resources.
What is strategy?
Michael Porter is considered one of the godfathers of business strategy, and I think this section of the article linked to above does a nice job of capturing the essence of what strategy is”
“Porter argues that operational effectiveness, although necessary to superior performance, is not sufficient, because its techniques are easy to imitate. In contrast, the essence of strategy is choosing a unique and valuable position rooted in systems of activities that are much more difficult to match. Porter thus traces the economic basis of competitive advantage down to the level of the specific activities a company performs.”
Why do you need a strategy?
The reality is that the business world is increasingly competitive every day, and you have limited resources to put to use to try to win. An effective strategy is incredibly important for your smaller venture because, in order to survive, in order to actually do something that generates enough cash for you to really invest and grow a healthy business, you’ve got to differentiate your business from the competition in a way that’s meaningful and valuable to your target customers. Otherwise there’s no compelling reason for for customers to choose you over your competition. That differentiation comes from your strategy.
The 3 components of an effective strategy
Since I’ve always found the concept of strategy to be so unclear, it’s no surprise that my favorite line out of the book Blue Ocean Strategy is a simple summary of what makes an effective strategy. Here’s what they say:
“An effective Blue Ocean Strategy has three complementary qualities: focus, divergence, and a compelling tagline.”
Nice and simple, right? An effective strategy has focus, divergence, and a compelling tagline. That’s not so hard to get our hands around, is it?!
Let’s break it down real quick to make sure it really sinks in.
To have an effective strategy and a chance at winning, a business has to decide where they are going to put their limited energy and resources.
You can’t be all things to all people…we know that. You can’t own all of the product attributes. You can’t own all of the brand attributes. So you’ve got to decide what you are about, and what things you’re going to focus on and take ownership of in your particular market.
Think about the brands that you resonate most with as a consumer. Don’t they all mean something specific to you?
Nike means competition and winning.
Virgin means fun.
Mercedes equals quality and luxury.
These brands mean something specific because they chose to focus, and have done so consistently for decades. You’ve got to follow their lead and get very, very clear about how you’re going to focus to win, because if you try to do or be too many things, it’s a guaranteed recipe for disaster.
So a strong, effective strategy has focus.
The second thing that an effective strategy has is divergence.
Divergence means that you need to find a way to pull away – or diverge – from the current mass of competition in your market. That’s where name of the book ‘Blue Ocean’ comes from. Blue Ocean refers to uncharted blue waters, versus the red ‘bloody’ waters where battles are currently already taking place in the market.
In Red Oceans, there’s lots of competitors thrashing around for market share, and most of that competition looks and sounds very similar to one another. There is no clear divergence, so customers have a hard time determining why they should choose one company over another. Growth in market share becomes very hard to achieve, margins get squeezed, and business simply gets less fun!
This is what happens when you try to ‘keep up with the competition’. You become more and more like them. You lose what makes you special.
If you want to try to find that new market opportunity, the Blue Ocean to sail your business into where you aren’t directly comparable to your competition, you must find a way to differentiate your business and create a unique competitive edge.
3. A Compelling Tagline
Then finally, the last thing is a compelling tagline. I told you the Blue Ocean approach was practical! A tagline…I love it!
Why, you may be thinking, is a tagline one of the three critical components of an effective strategy? Fair question.
A clear, compelling tagline is the simplest and fastest way to communicate the value proposition that your business has for potential customers. It should be easy to understand and clear enough that when a customer thinks about your business, they can kind of just rattle off, “That’s business is all about ‘X’.”
To be clear, the authors of Blue Ocean Strategy aren’t suggesting that this it the tagline you’ll use in your branding and marketing for your business, but rather an ‘internal tagline’ to be used to clearly communicate your strategy to your business partners, team, investors, vendors etc.
They use the example of Southwest Airlines, a business is a nearly perfect example of a Blue Ocean Strategy business.
Southwest’s strategy tagline could be ‘the speed of a plane at the price of a car, whenever you need it’, because that’s what Southwest Airlines is all about. Direct flights, fast flights, on time, but cheaper prices than the other airlines. They were effectively aiming to replace long drives done by Texas salesmen with the speed and convenience of flying, at a cost that was comparable to driving. And that’s exactly what they’ve done, and have stuck to for 30+ years now.
Take the time to develop your strategy!
I’ve found that most entrepreneurs at smaller businesses have never really put in the time and effort to develop a clear strategy. What you likely don’t realize is how costly this is. Have a clear strategy is THE first step in creating a fast-growth, high-margin business.
Take the time to do it.
If you’d like more resources related the strategy for entrepreneurs, here are my favorites:
I’d recommend you get all three and devour them right away if you haven’t already!
Join our community of entrepreneurs
I’d love to hear what you come up with for your strategy, and help in any way I can. Join the community of entrepreneurs in our Facebook Group, say hi, and share what you come up with!
All the best,